Doing business in a changing China

Leading US companies realize that a judicious mix of competition and collaboration is key to success in China. That may seem contradictory to most, but some companies are eagerly embracing the concept.

Collaborating and competing “together”

There is a pragmatic appreciation in China for how collaborating with the US will accelerate development and fulfill the aspirations of its fast-growing middle class. It is, however, equally important to acknowledge that as significant shifts occur in the complex and interdependent US-China business relationship, tactical changes will not lead to success. That’s why some companies are adopting a whole new approach in their China-focused strategies.

Leading US companies realize that a judicious mix of competition and collaboration is key to success in China. That may seem contradictory to most, but some companies are eagerly embracing the concept. Take Goodyear, for example, which partners with local companies as its vendors while competing with them through brand power and differentiation in a booming domestic market. “The model we have built in China is make in China for China and buy in China for the rest of the world,” says Pierre Cohade, president of Goodyear Tire & Rubber Company’s Asia Pacific region. In other words, the tire company operates a state-of-the-art manufacturing plant in Dalian to produce high-value-added consumer and commercial tires for the Chinese market while also maintaining a sourcing center in Shanghai for the rest of the world.

As China undergoes massive urbanization while building out distributed renewable energy and smart-grid and electric vehicle infrastructures, US companies have opportunities to deploy their technologies in Chinese markets more rapidly and on a larger scale than in their home markets.

Competition and collaboration go hand in hand in the cleantech sector, which comprises emerging environmental industries that aim to achieve the multiple goals of environmental protection, resource conservation, and economic growth. Virtually nonexistent five years ago, China’s cleantech market, aggressively backed by the Chinese government, is estimated to reach $1 trillion by 2013.9 While many in the US rue the cleantech race with China, some believe in harnessing China’s strengths to their own advantage. As China undergoes massive urbanization while building out distributed renewable energy and smart-grid and electric vehicle infrastructures, US companies have opportunities to deploy their technologies in Chinese markets more rapidly and on a larger scale than in their home markets. “The generally shorter productization cycles in China may well lead to accelerated commercialization of cleantech products,” says Victor Westerlind of venture capital firm RockPort Capital Partners. “It was the same with how 19th-century American industrialists copied British technology,” he adds.

US-headquartered eSolar is just one example. Through a licensing agreement, the company has partnered with Chinese electric power equipment maker Penglai Electric to use its concentrated solar panels to help build at least 2 GW of solar thermal power plants in China over the next 10 years.10 Interestingly, such arrangements no longer follow predictable cross-border patterns. The Chinese government has signed cooperation agreements to license its high-speed electric rail technology to General Electric in the state of California, with the understanding that at least 80 percent of the components will come from American suppliers.11